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Article: Do call prices and the underlying stock always move in the same direction?

TitleDo call prices and the underlying stock always move in the same direction?
Authors
Issue Date2000
Citation
Review of Financial Studies, 2000, v. 13, n. 3, p. 549-584 How to Cite?
AbstractThis article empirically analyzes some properties shared by all one-dimensional diffusion option models. Using S&P 500 options, we find that sampled intraday (or interday) call (put) prices often go down (up) even as the underlying price goes up, and call and put prices often increase, or decrease, together. Our results are valid after controlling for time decay and market microstructure effects. Therefore one-dimensional diffusion option models cannot be completely consistent with observed option price dynamics; options are not redundant securities, nor ideal hedging instruments - puts and the underlying asset prices may go down together.
Persistent Identifierhttp://hdl.handle.net/10722/212718
ISSN
2015 Impact Factor: 3.119
2015 SCImago Journal Rankings: 9.925

 

DC FieldValueLanguage
dc.contributor.authorBakshi, Gurdip-
dc.contributor.authorCao, Charles-
dc.contributor.authorChen, Zhiwu-
dc.date.accessioned2015-07-28T04:04:47Z-
dc.date.available2015-07-28T04:04:47Z-
dc.date.issued2000-
dc.identifier.citationReview of Financial Studies, 2000, v. 13, n. 3, p. 549-584-
dc.identifier.issn0893-9454-
dc.identifier.urihttp://hdl.handle.net/10722/212718-
dc.description.abstractThis article empirically analyzes some properties shared by all one-dimensional diffusion option models. Using S&P 500 options, we find that sampled intraday (or interday) call (put) prices often go down (up) even as the underlying price goes up, and call and put prices often increase, or decrease, together. Our results are valid after controlling for time decay and market microstructure effects. Therefore one-dimensional diffusion option models cannot be completely consistent with observed option price dynamics; options are not redundant securities, nor ideal hedging instruments - puts and the underlying asset prices may go down together.-
dc.languageeng-
dc.relation.ispartofReview of Financial Studies-
dc.titleDo call prices and the underlying stock always move in the same direction?-
dc.typeArticle-
dc.description.natureLink_to_subscribed_fulltext-
dc.identifier.scopuseid_2-s2.0-0034412341-
dc.identifier.volume13-
dc.identifier.issue3-
dc.identifier.spage549-
dc.identifier.epage584-

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